A recent article on this site detailed how United States Natural Gas (NYSE: UNG), the exchange traded fund for natural gas, was up for the week.
Today United States Natural Gas is off due to a warm weather report.
It has been a brutal period for fossil fuels: securities for oil, coal, and natural gas are all down. United States Oil (NYSE: USO), the exchange traded fund for oil, is down by over 30 percent for 2014. Market Vector Coal (NYSE: KOL), the exchange traded fund for coal, has plunged, too. It is much the same story with United States Natural Gas (chart below).
Exchange traded funds for oil, coal, and natural gas have bullish futures.
The oil, coal, and natural gas industries will not be going out-of-business. There will be many firms that go bankrupt, especially in the coal sector. But exchange traded funds offer diversity though holding many different securities from that industry group.
This diversity is what offers the needed risk management for investors.
In the coal industry, this is crucial due to the carnage among even the best stocks. Peabody Energy (NYSE: BTU), considered to be the Blue Chip company in the sector, is down more than 55 percent for 2014. It is down for the last month, quarter, six months, and year of market action.
But demand for coal is expected to increase around the world.
That is the same story for oil and natural gas, too. Looking at what has happened to Peabody Energy, it is understandable if investors do not want to invest in individual stocks in troubled sectors. That is what makes exchange traded funds such as United States Natural Gas, United States Oil, and Market Vectors Coal so appealing for the long term. Each offers a wide range of securities for a sector in which demand is expected to increase for the product.